Good evening. Thank you for this opportunity
I would like to preface my main remarks with some thoughts on the United Airlines incident, the laptop ban and IATA in general.
Everyone, including United, agrees there is no justification for what happened to Dr. David Dao. United Airlines CEO Oscar Munoz has apologized repeatedly and is taking steps to ensure there is never a repeat.
There are, however, calls for more heavy-handed government oversight. That would be a retreat from the competitive market forces unleashed by deregulation. The video was so shocking that it would be easy for lawmakers and regulators to get caught up in this groundswell of outrage.
But there’s an old legal saying that hard cases make bad law. That wisdom applies here. The management of overbooking has actually worked well for decades. It ensures that scarce capacity is efficiently utilized. Avoiding empty seats helps to keep costs—and fares—low. And governments, including the US, have acknowledged that this ultimately benefits consumers.
A few facts might help to bring this into the clarity of a bigger picture. About 100,000 flights carrying 10 million people operate safely each day. Through robust competition, average ticket prices globally have fallen 63% in real terms over the last 22 years, before surcharges and taxes.
What happened on that United flight was absolutely unacceptable. It was also completely outside the norm for the four billion passengers who will travel this year. So let’s not judge the entire industry by a single, extraordinary, event.
As we hear of regulators and politicians contemplating “solutions”, it’s important to remind them that we share a common goal of getting passengers to their destination—on time, safely, and without incident. If industry-level change is discussed, let’s make sure that there is a transparent fact-based dialogue between industry and regulators. We have had many experiences with regulation that has not been thoroughly thought-out. Most of the time it comes with unintended and costly consequences.
We have seen that with the laptop ban—implemented with next to no notice, no dialogue and no coordination. The result tests public confidence in how governments and industry work together to keep flying secure. It raises too many questions. Why on some flights and not others? How did the UK and US end up with different lists? What are the implications for safety of having so many lithium batteries in the hold? And surely, with all that has and continues to be spent on screening, we must be able to find a technology-based solution?
We are now in a more open dialogue with governments on this important issue. And the responses of Canada, the EU and Australia to the same intelligence demonstrate that a ban on large electronic devices in the cabin is not the only way forward. Indeed we believe that it is not sustainable in the long-run. So, even as rumors persist that the ban will be extended, we are calling on governments to work with the industry to find alternatives—to keep flying secure without such great inconvenience to our passengers.
Helping governments and stakeholders to understand the industry—in this case to understand what can work operationally—is an important function of IATA. I am sure that you are all familiar with our association but let me spend a few minutes on my vision of what IATA is.
First and foremost, IATA promotes safe, efficient, and sustainable global connectivity by air. The importance of that must not be underestimated. Aviation is the business of freedom. Our industry liberates people to live better lives. We do that by connecting people, goods, markets and ideas across great distances. But that can only happen with borders that are open to people and trade.
So we are deeply concerned with political developments—including some here in the US—which point to a future of more restricted borders and protectionism. These deny the benefits of globalization, which aviation makes possible by safely transporting over 50 million tonnes of cargo and nearly four billion passengers annually.
Second, IATA has a unique global view. With our 265 members and other stakeholders, we set global industry standards and facilitate their implementation. Aviation could not function with different systems and standards for each airport or destination.
Third, IATA is involved in the global air transport business. This includes our training and consultancy activities and business intelligence products such as Direct Data Solutions, which we offer in partnership with our friends at ARC. And of course, just as ARC does here in the US, we operate travel agent programs and industry financial systems globally outside the country.
It has been a few years since my predecessor spoke to this group, so with your indulgence I’d like to update you on some of the key areas where we are working together and have the opportunity to increase our cooperation. These include:
- The New Distribution Capability, or NDC,
- ONE Order, and,
- The next generation of IATA Settlement Systems, which we call NewGen ISS.
Let’s look at NDC first.
NDC will play a transformational role in helping airlines to meet customer demands for a more personalized air travel product. Meeting this demand, airlines are offering fare families and a growing number of ancillaries. Now passengers want to compare the value of these propositions across airlines—just as they do when shopping for other consumer goods.
NDC is enabling this possibility through the development of a modern, XML-based data transmission standard for communications between airlines and travel agents. By the way, the global distribution systems (GDSs) are also moving in this direction but we need to encourage them to move faster and to adopt the full spectrum of NDC as quickly as possible. I am sure that I don’t need to remind you that standards reduce costs, and encourage innovation. And that is just one of the NDC wins.
For travelers, NDC means greater transparency and access to all of an airline’s offerings when shopping via a travel agent or online travel site.
For travel agents, it enables easy access to all of an airline’s offerings. This is no small matter—a survey we conducted jointly with several travel agent associations, including the American Society of Travel Agents, showed that agents believe that they are at a competitive disadvantage by not being able to easily offer their customers the full range of an airline’s options.
The work that we are doing with the agent community illustrates a lesson that we learned early in the NDC process—that engaging and collaborating with our stakeholders is important.
In that vein, we have also launched a special microsite with tools and information relevant to business travel agents, self-booking tool providers and corporate travel buyers. As an example, we have developed NDC Change Readiness Guides for travel management companies (TMCs) and travel managers.
There is also very strong interest from the Travel Buyer community./p>
- We have created Travel Management Advisory Groups in Europe and North America to discuss NDC and related issues affecting corporate airline programs.
- At the end of this month, we will host our second annual IATA Business Travel Summit to explore the opportunities for business travelers and TMCs enabled by the NDC standard.
Overall, I am pleased to report that NDC is now in the implementation phase. But the standard continues to evolve. We are at the fifth iteration, which was initially released in September 2015. Based on feedback from deployments and pilots, new versions are published twice a year.
To date, 33 airlines have already deployed all or part of the standard, more than double where we were at this time last year. Dozens more airlines are telling us they intend to as well.
By the way, one of the benefits we expect to see from NDC is a reduction in Agent Debit Memos (ADMs), since in an NDC environment, the airline makes the offer and provides it to the agent through an aggregator such as a GDS, or directly. However, we are not waiting for NDC to address ADMs, which we know are a big sore spot for the industry.
Following on ARC’s successful effort to reduce ADMs in the US, we are undertaking a global effort, taking a “facts, not blame,” approach. A working group composed of all stakeholders is conducting a comprehensive root cause analysis of ADMs which will guide our efforts to minimize them.
Moving beyond NDC, the next challenge is to free our passengers from the multitude of identifiers associated with any one booking—the GDS reservation number, ticket number and airline reservation number. It’s unnecessarily complicated for travelers and inefficient for airlines and our travel agent partners. This is where ONE Order comes in. It complements the modernization initiated by NDC.
With ONE Order, the only thing that passengers will need to locate their itinerary and be recognized throughout their journey is a single order number. It will greatly simplify the passenger experience and remove one of the hassles of travel—trying to find the correct document or number when dealing with an itinerary change or a travel disruption. It also has the potential to facilitate greater interoperability between traditional and ticketless carriers. As more ticketless carriers recognize the value of third-party distribution providers to reach the business travel segment, this has positive implications for your businesses as well.
We are only at the very beginning with ONE Order development. It will require strong cooperation with our IT partners. And we must be prepared for fundamental change in the back-office—replacing not just legacy systems, but also the legacy mindset.
Together, NDC and ONE Order will bring airlines into the world of modern retailing. But we are not stopping there. We are also modernizing the IATA Settlement Systems, which in the context of this group, means the Billing and Settlement Plan (BSP). That’s where NewGen ISS comes in.
NewGen ISS represents a significant re-visualizing of the ISS, which was launched in 1971. Without a doubt, it has served the industry well over the past 46 years. However, the rules for the ISS were established in an era of paper ticket stock, brick-and-mortar travel agencies, limited payment methods and a highly regulated airline industry. While the rules evolved over the years, a comprehensive overhaul is needed to address the diverse and complex needs and risks of airlines and travel agents today as well as the technological revolution that is taking place in payment systems.
We are continuing to work in partnership with forums such as the Passenger Agency Program Global Joint Council and Agency Program Joint Councils to arrive at win-win solutions that we will begin rolling out in 2018:
- For airlines, NewGen ISS means faster settlement, safer funds and a lower cost of distribution.
- For travel agents, NewGen ISS offers more products and services with greater flexibility. It includes IATA EasyPay, a secure and efficient pay-as-you-go solution that we expect to be popular in parts of the world where cash is still king when it comes to buying tickets.
I think I’ve used up most of my time, so I’ll conclude by returning to one of my favorite themes. Aviation is the business of freedom. It matters to real people—linking them with loved ones and helping them to expand beyond their local horizons. Aviation has the power to transform economies by connecting global markets. Aviation can preserve the enormous benefits of globalization in a skeptical world. All of us here should feel proud—and honored--that we are contributing to making the world a better, richer place.